This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Business Income Manual

Foreign exchange: 'Marine Midland matching’

It is very unlikely that a business will be perfectly matched in a particular currency throughout a period of account. There will normally be an excess of assets over liabilities, or vice versa, for at least part of the period, giving rise to a residual exchange difference in the profit and loss account. You will need to decide how much of that exchange difference is revenue, and how much is capital.


A sole trader places €100,000 on long-term deposit with a bank. This is agreed to be on capital account. She also has a euro overdraft on current account, which does not exceed €70,000 at any time in the period. During the period, sterling strengthens, leading to a loss on the deposit and a gain on the borrowing. The profit and loss account shows a net loss of £3,000.

Since the capital assets always exceed the current liabilities, the residual loss must be wholly attributable to the long-term deposit, and it is therefore added back as capital.

It is straightforward, on the simple facts of this example, to see the answer. In a more complex case, dissection of the elements of the profit and loss account figure may become impracticable. For this reason, Statement of Practice SP02/02 sets out a simplified procedure. There are illustrative examples in SP02/02, which you should study in a case where ‘Marine Midland matching’ is in point.

It is not mandatory for traders to follow the SP02/02 procedure, and HMRC staff should accept any method that gives a reasonable result, provided it is used consistently from year to year.